Adelphia bonds firmer; Movie Gallery bank debt rebounds from Friday fall

By Paul Deckelman and Sara Rosenberg

New York, Feb. 6 - Adelphia Communications Corp. bonds were seen continuing their recent firming trend amid investor confidence that the bankrupt Greenwood Village, Colo.-based cable systems operator's sale of its assets - which cleared a key hurdle last week - will be accomplished soon.

In the bank debt market, Movie Gallery Inc.'s term loan B recovered and then some on Monday after sliding Friday, as the Dothan, Ala.-based video rental chain company assured investors that fourth quarter numbers will come in line with previous expectations, traders said.

Adelphia's bonds were "well-bid for," according to a trader in distressed notes. He pegged the company's 8 3/8% notes due 2008 and its 9 7/8% notes due 2007 both at 69, "a little better" than they had been on Friday. He also saw its 10¼% notes due 2006 at 74 bid, 75 offered.

Another trader saw the company's 10¼% notes due 2011 having moved up 1½ points to 68.5 bid, while yet another trader estimated the 9 7/8% notes up perhaps two points on the day to 68.5 bid, 69.5 offered.

There was no fresh news seen out Monday that would explain such a rise, traders said, although they noted that the Adelphia bonds had recently been considerably stronger, apparently buoyed by the progress that has been made toward the expected completion of the $17.6 billion deal under which Adelphia agreed to sell substantially all of its assets to a Time Warner Inc.-Comcast Corp. team

That buyout deal got a big boost last week when the Federal Trade Commission completed its review of potential anti-trust concerns without having found any of them.

Calpine Corp.'s bonds "moved a little bit," a trader said, seeing the bankrupt San Jose, Calif.-based 8½% notes due 2010 and its 8¾% notes due 2013 at about 90 bid, while its 8½% notes due 2011 were at 27 bid, 29 offered.

He saw the 9% notes connected to the company's Tiverton, R.I., plants "a little easier," at 75 bid, 80 offered on news that the company had filed a motion in its bankruptcy case to reject power plant lease agreement on Tiverton and another plant in Rumford, Me. Calpine said it had to scrap those contracts to help its reorganization effort.

At another desk, Calpine's 8¾% notes due 2007 were seen down a point at 43 bid.

Asbestos names higher

A trader said that asbestos names seemed firmer, as the full Senate finally began its long-awaited debate on a bill that would set up a $140 billion national trust fund to pay asbestos-related medical claims.

He saw bankrupt Toledo, Ohio-based insulation maker Owens Corning's bonds having moved up to around 93 bid from prior levels around 90. However, he saw bankrupt Lancaster, Pa.-based floorcovering maker Armstrong World Industries' bonds staying in a lower 80s range.

And he said that bankrupt Chicago-based building supplies maker USG Corp.'s bonds - which zoomed into the mid 140s last week after the company announced plans to set up its own trust fund to dispose of its nearly $4 billion of pending claims - were unchanged at those levels. "There was no activity," a trader said. USG also said it plans to pay off its bondholders, bank debt holders and other creditors.

Movie Gallery loan jumps

In the bank loan market, Movie Gallery's term loan B ended Monday's session at levels of 93.75 bid, 94.5 offered, according to a trader, up from the 92 bid, 93 offered type of range at which the paper closed out Friday's session, after dropping off from the 93 bid, 94 offered area during market hours, the trader said.

Some other traders did not see Movie Gallery's term loan B quoted quite that high at the end of the day Monday, with one source placing level at 93.25 offered, and another source placing levels a bit wider at 93 bid, 94 offered.

However, all agreed that the paper definitely rebounded from the fall off late last week.

"They reaffirmed guidance today. It fell off the shelf on no real news [Friday]. It just felt heavy. I think people were just looking for some guidance and they got something solid today," one trader explained.

"It was more quoted than traded," the trader added.

The company's 11% notes due 2012 were meantime seen about half a point better at 70 bid, 71 offered.

On Monday morning, Movie Gallery reaffirmed its guidance for the fourth quarter of 2005 of revenues between $675 million and $705 million and same-store revenues in the range of 5% to 9% better compared to the fourth quarter of 2004.

The company's normal year-end audit is in progress, and it expects to report its fourth quarter and full year results in March.

Movie Gallery also said that it expects to be in full compliance with all credit facility covenants for the fourth quarter but plans on resuming discussions with lenders regarding further amendments to its senior credit facility in the near future because of softness in the rental industry.

Surprisingly, the news of further amendments potentially being needed seemed to have no negative effect on the bank debt.

"People see it as an opportunity for increased pricing or fees," one of the traders said, explaining why the amendment announcement seemed to go unnoticed.

InSight bounces

Also in the bond market, traders saw the 9 7/8% notes due 2011 of InSight Health Services Holding Corp. - which had fallen sharply on Friday on market concerns over the impact expected cuts in Medicare reimbursements are likely to have on the company - having bounced off Friday's closing lows.

The Lake Forest, Calif.-based diagnostic imaging services provider's oversold bonds were seen having moved up two points on the day to 47 bid, 49 offered.

A trader saw the company's floating-rate notes a point better at 90.

He saw bonds of some other companies in that same industry and likely affected by the same coming Medicare changes also having bounced back a little from Friday's losses, with Radiologix's notes at 72.5 bid, up half a point, and MedQuest's notes also half a point upward at 79 bid, 80 offered.

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